Georgia facing spending limits, governor says

ATLANTA — Gov. Nathan Deal said Tuesday that his legislative agenda will be pared back because a still-weak economy is limiting how much Georgia can spend, a problem likely to linger for several years.

The Republican has proposed a $40.8 billion spending plan for the financial year starting in July, along with amending the current budget to account for less-than-anticipated tax collections and growing health care costs. Since the recovery from the Great Recession has been weak, state leaders face hard constraints on what they can spend.

“We do not have as elaborate an agenda this as we have had in previous years,” Deal told a joint meeting of the House and Senate appropriation committees.

Lawmakers, who can change or reject Deal’s budget plans, started their own reviews Tuesday of departments and agencies. Deal has ruled out raising taxes to deal with budget shortfalls.

Deal’s primary budget problem is that Georgia is taking in less money than anticipated. While the current budget was pegged on state revenues growing 5.2 percent, those collections stood at 4.9 percent in December on a year-to-date basis.

Deal earlier instructed most agencies and departments to trim their budget to account for the shortfall. At the same time, Georgia has been forced to pay more than expected for Medicaid, a health insurance program for low-income residents, as more people join the program.

With budgets spread so thin, politicians have few resources for major new projects.

In his remarks, Deal asked lawmakers to approve roughly $13 million to restore 10 days of instruction that were eliminated from a pre-kindergarten education program in earlier rounds of budget cuts. The governor also proposed a modest 3 percent increase for recipients of the lottery funded HOPE scholarship. He requested $50 million to nearly complete the state’s promised contribution toward a project to deepen the Port of Savannah.

The Republican also asked lawmakers to support legislation that would authorize the Board of Community Health to levy a tax on hospitals that is set to expire this year. The tax, which raises roughly $230 million annually, is used as state matching money to secure another $400 million-plus of federal support for the Medicaid program. The money is then paid back to the hospitals in the form a higher payment rate for treating Medicaid patients.

“We cannot afford to have a $700 million hole in our Medicaid budget,” Deal said.

It may take until 2014 before Georgia receives as much tax revenue as it did before the Great Recession, which started in late 2007, said Kenneth Heaghney, a Georgia State University professor who serves as the state’s fiscal economist.

Growth in Georgia’s labor market has started outperforming the rest of the country, the housing market shows signs of improvement and some of the state’s most important sectors — information technology, professional and business services, and manufacturing — are growing. But consumer spending is subdued and business investment has slowed.

He cautioned lawmakers that increasing federal taxes, a sluggish global growth and uncertainty over federal spending policy could constrain economic growth in Georgia.

“So all of this creates an environment in which there’s still a lot of economic uncertainty,” Heaghney said. “And so we try to plan for that, but there’s a lot of different ways the economy could move depending on how these three areas play out over time.”

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The State continues to cut jobs. It also increases employee contributions to benefits, thereby reducing their take-home pay. Plus, the last five years, the state hasn't given cost of living raises to employees even though the cost of everything has gone up. The math is self-defeating. When state employees bring home less in their pay checks, they have less to spend in the first place. When the cost of basic necessities goes up, they have less to spend on luxuries. In the end, the state collects less sales tax. People have to have money to spend it. Some state employees I know are bringing home $200 less per month than they did when the recession started-- even with the extra cash the Social Security tax break put in their pockets. Since the Social Security tax break has expired, they will be bringing home $250-$300 less per month than when they did in 2008. When you consider that GRU has like 10,000 employees, you're looking at at least $1 million per month that people could be spending in the local economy. I say at least $1 million because some GRU employees make considerably less than others. The lost wages at GRU could be paying the wages of lots of workers in lots of local businesses, though.